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Shopping districts of Hong Kong is facing drop in mainland shoppers

A descent in mainland Chinese visitors has put a dabbler on store rents in one of Hong Kong’s shopping districts, possibly changing up a retail mix that had provided heavily to shoppers of mainland.

Causeway Bay which is the major shopping district where visitors fill suitcases with fish-oil capsules, beauty face masks, baby formula as well as Rolex-selling stores and Burberryand branches of Tiffany had thrived with the increasing flow of customers from across the border in recent years.

Other factors which are keeping mainlanders away is last year’s anti-Beijing protests and local resentment against the crowding from mainlanders however 160,000 Chinese tourists have visited last year.

During seven-day Lunar mainland Chinese tourist arrives which is a New Year travel period in mid-February, that has down for 4.3 percent from the year before.

According to Hong Kong tourism board arrivals has been dropped from the month of January.

Mr. So said “the drop has worsened since. In the first three weeks of March, mainland Chinese tourist arrivals fell 13% from a year earlier, he said, adding that the number of mainland tour groups visiting Hong Kong on an average day had plunged by 45%.“

Retail sales are facing a drop of 14.6 percent in January month from last year and sale of jewelry also has been dropped by 21.4 percent, says the government figures.

Store rents has also been affected. According to Jones Lang Lasalle’s primary data, shop rent has been dropped in Causeway Bay with 3 percent in the first quarter of the year since the first fall of 2009.

“Some shops will have to close, especially in the main tourist shopping districts, because there are fewer mainland Chinese visitors now,” said Lau Oi Kwok, chairman of the Hong Kong General Chamber of Pharmacy Ltd.

“The strength of the U.S. dollar, to which the Hong Kong dollar is pegged, makes other destinations such as Japan, South Korea or Europe more enticing for Chinese shoppers”, said Nicole Wong, an analyst at brokerage CLSA.

But she said that the cooling retail boom means opportunities for other kinds of businesses to regain a foothold: “Landlords may begin to rent to shops with more creative differentiation or local character,”

“We could see some stores selling shoes or clothing, not necessarily catering to mainland Chinese tourists, returning to Causeway Bay,” said Kenneth Yau, senior regional sales director at Centaline,

He said “under a recent deal brokered by his firm, a drugstore tenant signed a lease on a popular Causeway Bay shopping street for 450,000 Hong Kong dollars (US$58,000) a month, down from the asking price of HK$700,000.”

“Drugstores used to pay as much as HK$800,000 a month, and people were fighting for those leases,” he said.

Just a little over a year ago, a McDonald’s on Russell Street in Causeway Bay, which has the highest rental rates in the world by some measures, made way for yet another beauty-product chain store.

A 36-year-old manager at a family-run Vietnamese restaurant said they are planning to shut the business in February and also said that “restaurant is in discussions with the landlord about the rent and is remaining open for now.”

“We see falling rents as a good thing. It’s creating an opportunity for retailers,” said Denis Ma, head of Hong Kong research at Jones Lang LaSalle. “If you look at the retail market over the last two years, the vacancies have been so low that there’s been no room for retailers to expand or relocate. It really becomes a landlord’s market.”

He said luxury stores in another well-known Hong Kong shopping area, TsimShaTsui’s Canton Road, which have drawn large numbers of mainland shoppers, are likely to still hold up. “But doesn’t mean they won’t be affected by a fall in visitor spending,” he said.